Buy Versus Rent Spreadsheet

One of the very cool things about Google Spreadsheets is how fully web integrated it is. The web side of it is not an afterthought, but rather a key part of its design and construction.

The blogger of a Real Estate agent in Colorado decided to post this spreadsheet that allows a potential buyer or seller to determine which form of occupancy works best for them. His model lets you plug in for 10 factors:

1. Expected appreciation rate
2. Interest rate on a 30 year fixed mortgage
3. Purchase price
4. Property taxes
5. HOA fees
6. Capital gains when you sell (if applicable)
7. Maintenance costs
8. Holding period
9. Estimated tax deduction (for the full holding period)
10. Alternative monthly rent.

Yes, it is a basic analysis; But its so fascinating how easily apps of this type can be shared with anyone online.

Expect to see a whole lot more of these kinds of applets as web integration accelerates.


Buy Versus Rent Spreadsheet


Three questions about this:

1) How easily is it to integrate Excel — a desktop app — into the website versus a internet-based spreadsheet?

2) Have these free web based apps evolved to the point where they are a legitimate competitor to Excel?

3) How much share can this steal?

This is a far more refined app than I previously perceived it to be . . . 

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What's been said:

Discussions found on the web:
  1. Bob_in_ma commented on Oct 12

    I think this is a bigger deal than it seems right now. The ability to easily share data is only one aspect. Another is portability. What if PCs evolve back to being just enhanced terminals? You won’t need your laptop on a plane, just a simple terminal on the seat back connected to the Web.

    On a side note, that spreadsheet makes a common error in calculating tax savings. Since by itemizing, you lose the $10,000 standard deduction (for couples), your tax savings is only anything above that.

    The financial advatages of homeownership are totally exaggerated. He has $500/year for maintenance. Sure, except in years when you need to have the house painted, a roof replaced, a large tree removed, etc, etc. And where’s the cost of the water/sewer bill? No renter pays that. And how about liquidity? A renter can simply move once the lease has expired. Selling the house takes months.

    Add negative equity growth to the mix and the case for renting is a no-brainer.

    I wonder waht we could get for this place…? ;-)

  2. cman commented on Oct 12

    Let’s look at your questions.

    1. If you noticed when you were playing with it, one can import and export not only from .xls formats but also other common file formats. I uploaded a cash-flow statement on multiple sheets here. So, the answer this question is: pretty easy.

    2. At the basic and middling-advanced levels — which is the core competency level of about 80% of the people using these apps — it looks feature comparable. I don’t see pivot tables and graphs… yet. But again, for basic stuff like budgets, pro-formas, schedules and simple statistical analysis it looks pretty good in comparison to Excel.

    3. Let’s look at Mister Softee’s pricing on Office 2003:
    Office Student and Teacher (Academic Only) $149.00
    Office Basic (OEM Only) $184.00
    Office Standard (Lowest Cost Retail) $399.00
    Office Professional $499.0o

    Google Office: Free.

    That said, the Open Office Project has offered a feature-complete, very compatible with Office free desktop suite for more than three years now. The 2.0 release is very good performance-wise on newer hardware. Yet OO (and StarOffice, the Sun Microsystems non-free version for Sun OS) only have about 14% of the enterprise market.

    On the third hand. Google has cachet. The Google apps are absurdly easy to use and do not require a download or install. I think this kind of thing just sends big shivers down the spine of Mister Softee.

  3. crack commented on Oct 12

    This is great for sharing and colloborating, as cman points out the import export functions are easy to use. The problem is that google then has access to all your data. I don’t think they’ll do anyting nefarious with it, but some stuff is better left out of the reach of others.

    Open Office is great, I think it’s spreadsheet is better than the bloatware from microsoft. It can also handle the xls formats.

  4. bob commented on Oct 12

    His assumptions are too twisted toward buying. In addition to those pitfalls already mentioned in post by Bob_in_ma:

    He assume 2% appreciation. In Colorado? The state that is #1 in foreclosures???

    Put 0% appreciation if you are extremely optimistic.

    Put -2% to get real.

  5. wcw commented on Oct 12

    “It looks like you don’t have access to this spreadsheet.”

    In re: buy-vs-rent, if I haven’t mentioned before, I find this style of analysis more than simple, I find it unsatisfying. That’s off-topic, but if I figure out a way to put my toy BVR simulation on Google, I shall. It needs help, too, but at least it has the standard deduction.

    In re: Google Office, the difference between this and OpenOffice or Gnome Office or whatever is that Google’s is hosted there, so nobody needs to wrestle with installation and all it takes to share a spreadsheet with someone is the appropriate permissions and a link. That is, indeed, exciting, though for now I do not see it threatening Microsoft’s office-suite monopoly. Its likely course for now is as an occasional utility for collaboration or publication.

  6. KP commented on Oct 12

    Google’s stuff is about on the level of microsoft works not so much the office package. I think I read that microsoft was going to be including this software for ‘free’ with their($200)Vista OS….Web 2.0 becomes a harder sell when privacy issues are considered. I don’t want Google’s search algorithms snooping through my data, trying to sell me financial services,etc. Nice to see someone making Ballmer a little nervous though.

  7. BDG123 commented on Oct 12

    So, let’s see. No macros and no graphing. Hmmm…. To be fair, it’s a nice tool for someone who doesn’t want to use the Microsoft Works spreadsheet which, btw is free with every PC and compatible with Excel, or doesn’t work for a company who already has Excel. That leaves………..uh…………..the Microsoft haters and bit twiddlers who like to toy with new geeky toys.

    Corporate America’s financial data is tied into their apps which typically have seamless integration with Excel. Every major CPA and accounting firm uses Excel and Microsoft has locked up the educational system with massive discounts so every student in school or university learns Excel. Microsoft offers full support including very good phone support. Oh, and the cost of developing Excel was sunk a loooong time ago.

    So, if Google ever does become a legitimate competitor, and they likely won’t, all Microsoft has to do is make their product freeware and charge for support or some other ridiculously easy notion. So, I would have the choice of a pervasive product with tens of thousands of macros and add ons built for it, all for free unless I need support or I have this oddity Google bought.

    Google ought to worry more about its core business because there are alot of scrappy competitors out to kabosh their business model. Btw, the only thing Google ever pioneered was how to monetize search. Their search algorithms are not the best. Well, actually, they didn’t pioneer monetizing search either. They just have the best algorithms for it.

  8. Syv commented on Oct 12

    As a reminder, when you are using Google Spreadsheet or any other Google application, such as Gmail, Google keeps tracks of that data. That data is stored on many storage servers and will never be deleted, even if you do.

    As a matter of fact, you agree that Google can use it in any manner that they want.

    That spreadsheet is not your’s anymore. It belongs to Google!

  9. Michael C. commented on Oct 12

    >>>the russell is rippin!!!! another 30 russell points and a new high confirming the dow high. divergences in the indexes can resolve themselves over time much to the chagrin of bears fighting the tape the whole way. good trading everyone.<<< Aren't we a little giddy. I'll take the other side of the coin. Upside breadth/volume is over 70% and this is all the market can muster? I now look forward to the downside. I'm of the belief Dow 12,000 will take years to clear.

  10. T commented on Oct 12

    It’s not worth even spending the time doing this spreadsheet unless you believe there’s going to be positive value growth on a nominal basis (2% being probably the minimum value. Otherwise, you’re taking a levered position in a declining asset… it’s hardly even a rent vs. buy discussion at that point.

  11. Economic Investigations commented on Oct 12

    News of the World #6

    Elsewhere King on Monetary Policy, Prof. Mankiw approvingly quotes Mervyn King on inflation. Oh, how things have changed! Contrary to popular sentiment, I have never been puzzled by Dr. Mankiws mix of Pigovian taxes and poli…

  12. Michael C. commented on Oct 12

    >>>wow the markets power on…. price rules.<<< Silent smart selling into new hands today. And those new hands will find themselves top ticking the market.

  13. Chief Tomahawk commented on Oct 12

    Anyone got a buck? Big real estate auction coming soon in Naples, Florida. Quality seems so-so, but if you scroll down the listings you’ll find the better stuff.

    The story:

    The auctioneer’s website:

    Scroll down and click on “Click Here to View Auction MLS Listing Sheets, Photos and Virtual Tours” to see the homes.

  14. christopherrobin commented on Oct 12

    >>>Silent smart selling into new hands today. And those new hands will find themselves top ticking the market.>>>

    I have heard that from 11K and up ….. What is smart selling exactly because it seems to just push prices higher.

    I like the Hawkish talk from the FED that is totally ignored. Really, WTF is going on.

  15. Osman commented on Oct 12

    Hi, thanks for posting about my little spreadsheet.

    I appreciate you letting me know about the tax deduction. I’ll add that to the notes at the bottom when I get a chance.

    As for skewing the example towards buying, keep in mind that you can put in your own assumptions. That’s the reason I put the spreadsheet online.

    The home the model currently displays is practically brand new. $500 may be on the high side for maintenance. Water bills, at least here in dry (and sunny) Colorado, are also usually paid by renters.

    As for appreciation rates, 2% is inline with a soft landing (which most economists are predicting). After ’01, the Denver/Boulder region saw a jobs migration because of the Telecom collapse. This created a cooling effect that caused our region to miss the stratospheric price appreciation of the bubbles. We’re now seeing a bit of slowdown, as expected, but nothing like what’s happening in bubble markets like Phoenix and Los Vegas.

    Actually, I gave a talk on the bubbles a few weeks ago. If you’d like a copy of my slides comparing our region to the bubble markets using OFHEO data, please contact me. You can also download my analysis of local housing markets.

    p.s. The house in the spreadsheet is a 3 year old, 4BD, 3BA on a corner lot in a very nice neighborhood. Great parks nearby, quiet street, and 3,000 SQFT (2,000 finished). It equates to $108/SQFT. Given the high quality of life and solid local economy, perhaps you can see why many of my new clients are coming to CO to escape the insane prices of places like CA.

  16. Bob_in_ma commented on Oct 12


    I didn’t mean for my comments to come across as critical as they did. When I said, the financial advatages of homeownership are totally exaggerated, I wasn’t referring to you, but to the common wisdom on the subject. It was poor wording on my part.

    But being a home owner for four years after renting for 20+ years, I find myself confronted by myriad expenses I never even thought of, and if someone asked me to give an estimate of what they were over the last four years, I would be just guessing. No one keeps track of the real costs of home ownership.

    Buying a home because you want to own a particular house, to have the room, the location, the yard, whatever, is all great. But financially it is definitely not the no-brainer many make it out to be. And a lot of people are going to find out that leverage works both ways.

  17. trader75 commented on Oct 12

    So, if Google ever does become a legitimate competitor, and they likely won’t, all Microsoft has to do is make their product freeware and charge for support or some other ridiculously easy notion.

    Let’s extrapolate this trend. Over time, the offerings of Google etc force Mister Softee to make excel free. Fine, no biggie. Then the same thing happens with Word. And Outlook. And Visio. And… what’s left?

    Microsoft’s redoubt seems to be big, entrenched corporations. The argument always seems to wind up in the same place. “Well, Microsoft owns the corporate world, and those guys will never switch.”

    Let’s call this the “hulking heap of inertia” argument. Microsoft is sitting atop a gigantic pile of corporate bureaucracy. IT managers everywhere rely on them because “you don’t get fired for choosing IBM, err, Microsoft.”

    Meanwhile, free apps like this google spreadsheet thingy make use of blue ocean strategy. They don’t get a toehold by competing with Microsoft directly; they do so by getting chops in uncontested areas where Microsoft has no niche.

    Spreadsheets on the web, for example. This real estate thing is a great example of blue ocean. How easy will it be for early adopters to start exploiting Google spreadsheets’ web capability, to share formulas and analyses with the world like this real estate guy did.

    I think one of Google’s hidden advantages is the way they target early adopters. Forget the corporate dinosaurs; those guys won’t change for love nor money. They are buried in piles of protocol.

    But the type of guys who fuel scrappy startups–the same startups that will be the fortune 500 companies of tomorrow–are exactly the type to try new things, to start playing around with this stuff early.

    Think for a minute about the “free excel” scenario.

    What happens if, by the time Microsoft makes excel free, the online spreadsheet product already has all the bells and whistles and is easy to use? And who’s going to give a crap about “support” for a spreadsheet product anyway?

    I suspect the “google owns your data” fear-based argument is also a canard. That always gets trotted out as a reason to quash the software-as-service model. Supposedly nothing is safe unless it’s on your desktop. I suspect that’s a bunch of cheese.

    For one, the line between desktop and web has become permanently blurred. In this day and age, you can accidentally agree to a EULA that gives a corporation unfettered access to your desktop. (Sony, Amazon video.) Internet connections are pretty much always-on now, and corporate trust is just something we’re forced to deal with.

    Second, why should I be more afraid of Google than I am of, say, my bank, which has all my vital info and a big chunk of my money. And why would I expect Google, as a $125 billion company, do something eeevil with my data, any more than I would expect my bank to sell me out to Snidely Whiplash.

    I think Microsoft has the potential to be a great value stock. They will be rolling in corporate inertia cash for decades to come. Their software licenses are practically a license to print money.

    But as for new innovation? They stink. What has Microsoft ever done in hardware? What have they ever done on the web? What capacity do they have for innovation? They’re frozen in a time warp while the world catches up with them. By the time all their products are free (with charge for support, snicker), their corporate inertia monopoly will be looking rickety and rusty. The early adopters who embraced alternatives will be next-gen company leaders by that time, and when Softee comes around for their business they will just laugh.

  18. trader75 commented on Oct 12

    Buying a home because you want to own a particular house, to have the room, the location, the yard, whatever, is all great. But financially it is definitely not the no-brainer many make it out to be. And a lot of people are going to find out that leverage works both ways.

    Lack of flexibility is a cost of ownership too, in my opinion. My wife has a friend, late twenties, who is a sales rep for Fedex. She bought a house last year and is paying something like $1700 a month for her mortgage. Recently I heard this friend talking about career opportunities for Fedex reps in Asia. My unspoken thought was, “you’re not going anywhere… unless you plan to take a bath on that albatross of a house you bought.”

    I think it’s ridiculous how young professionals are encouraged to ball-and-chain themselves to a permanent location with careers barely hatched. Opportunity in another location? Too bad. Want to slash expenses so you can start your own business? Too bad. Job went down the tubes, need to consider other cities for future prospects? Too bad. All that stuff gets crushed under the weight of a leveraged mortgage, tied to an illiquid asset, in a down market that could stay down for years.

    Conventional wisdom sucks.

  19. Chad K commented on Oct 12

    It overlooks two extremely important factors:

    Rent Inflation

    Property Tax Inflation due to Property Inflation

    If you do the calculation out 30 years, it appears to be less beneficial to own the house, but only because it assumes your rent will be the same in 30 years. Also the cost of property taxes is not increased by the value of the house.

  20. Osman commented on Oct 12

    Thanks Anon, VERY useful feedback. You’re right. I wrongly assumed no rent or property tax increases for the holding period. I’ll work those assumptions into a future version.

  21. Michael C. commented on Oct 12

    Now that’s a move off 70% breadth.

    Party like it’s 1999?

  22. wcw commented on Oct 12

    Oh, the off-topic fun.

    Osman, consider also:
    – in some jurisdictions (e.g., CA), property taxes are capped
    – in others, sometimes coinciding (like San Francisco), rent is controlled
    – some mortgages are assumable still, but most aren’t
    – refis aren’t free
    – investing isn’t, either, though costs are going down
    – state taxes matter

    And most important: returns are not all you should predict. You want to add a volatility measure and a correlation measure.

    Then simulate, and voila: a useful analysis.

    PS – a longtime CA resident, I dug the CO chauvanism the most.

  23. Cherry commented on Oct 12

    Party like its 1929, the FED is pumping a good amount money into stocks……..just like in 1920’s. Embarrasing, the market should be forced to decline now, much like it is forced to rise.

  24. Lord commented on Oct 12

    Overall, rents rise with inflation while owning will fall with inflation, so eventually it is better owning than renting, but eventually can be a very long time, especially if there are better investments for your money.

    The best estimate of maintenance, repair, and renovation is the percentage of value in the structure over a 30 year lifespan. A country house is 90% structure, so depreciation is 3%, a city house is 45% structure, so depreciation is 1.5%, while a metropolitan house is 30% or less structure for a depreciation of 1% or less.

  25. Osman commented on Oct 12

    wow, lots of good sugestions. I never envisioned this simple analysis to be used nationwide, but I’ll try to put in some of the items mentioned. Thanks for the help.

  26. M.Z. Forrest commented on Oct 12

    One of the things I saw missing was insurance.

  27. Barry Ritholtz commented on Oct 12

    I think it might work on a Mac on Firefox — I’ll compare that to the Dell in the office

  28. Jim Bergsten commented on Oct 12

    Friend osman seems to be getting a taste of what it’s like to suddenly support software that’s available worldwide. About twenty requests just from a handfull of blog posts.

    Just wait until the requests conflict with each other and are (implementation wise) mutually exclusive.

    Nevertheless, this is a great deal for Google — the web apps are credited to Google, yet they don’t have to support them. Guess who is going to get the irate email about the spreadsheet not working on Gimpwizzle Linux, Fredonia Edition?


  29. Jim Bergsten commented on Oct 12

    I wandered off to play around with this Google spreadsheet thing.

    I’d have to file it for the moment under the category “toy.”

    Just too too slow to be of any use to me. For corprate use, I’d also have concerns about data security.

    Maybe the underlying technology could be another web page designer’s “gadget,” but I can’t see using it personally or for business, at least in its current form.

    For whatever that’s worth.

    And, no I wouldn’t rather pay Microsoft anything, but sadly that’s money already spent.

  30. j d ess commented on Oct 12

    say whatever you will about whether goog will take share from msft. hell, say whatever you wanna say about it. but wow if that is some freaking amazing coding going on behind the scenes.

    also, i haven’t followed this too closely, but if this is their first swipe at an online spreadsheet, you can be damn sure everything it lacks (macros, graphs) will be there sooner than you think…geez, i can see users coming up with macros we’ve only dreamed about for excel once they let them…i mean, geez, look at the suggestions/collaboration taking place in the comments here…this is probably going to be bigger than people can imagine.

    profitable? that’s another question.

  31. BDG123 commented on Oct 12

    If you believe MS is not an innovator and G is, you don’t have a clue as to what MS actually does. The intellectual property they own is gargantuan.

    And, I’ll take your bet all day long that G will crack MS in their mainstay markets. They likely won’t even be able to hold their own markets over time.

    So far, it’s all babble. MS hasn’t lost a thing while all of the haters would surely like to see it so.

  32. angryinch commented on Oct 12

    Buy/rent spreadsheets are less than useless.

    The only variable that matters is rate of appreciation. With the right amount of appreciation, just about any “buy” makes more sense than a “rent.” With just about any rate of de-appreciation, just about any “rent” makes more sense than a “buy.”

    Yet rate of appreciation is the one variable you can’t be sure of. So it makes the entire process a complete guessing game.

    BTW, has anyone ever noticed that none of the current online buy/rent calculators allow you to enter a negative number into the “rate of appreciation” box? Funny, that.

  33. angryinch commented on Oct 12

    Real-life example:

    Back in 2001, I had a decision whether to buy a home or rent it. It was right after 9/11 and I was leaning towards renting. The rent was $4,000/mo. The monthly ownership costs were $8,500.

    Seems like a no-brainer to rent. So I went to an online calculator. It told me that if the house appreciated 3% a year or more, buying was the better decision.

    I didn’t really have the $8K a month anyway, so I rented instead. Turns out that the house hasn’t appreciated one thin dime in five years. And my rent has stayed the same as well.

    In five years, I have saved myself $270,000 by renting instead of buying. Yet the online calculator was practically begging me to buy.

    It’s all about the appreciation. Without it, it makes no sense at all to pay much more to own than rent.

    Unfortunately, no one can predict appreciation.

  34. Andi commented on Oct 13

    Google is opening up docs and spreadsheets API’s for independent developers, something MS can never do. This functionality will mushroom like nothing before. Hey, maybe it’s even a second online “new paradigm.” :)

  35. commented on Oct 13

    Google Spreadsheet of Buying vs. Renting

    The Big Picture has a pointer to this Google Spreadsheet of a buying versus renting cost comparison: .
    Its neat, but you have to save a copy to your own Google account before you can modify the values. There are a couple issues, having to do …

  36. j d ess commented on Oct 13

    i realized in the shower today that google has plenty of companies using their hardware for search. a software upgrade gives these customers access to privately stored internally stored docs. that built in chat comes in handy there…sorry, i’m still impressed.

    you cite the amount of intellectual prop that MS owns as an example of its innovation? how much was bought? how much truly was grown without responding to a threat? how much was copied? they may be secure in their place (i won’t argue that point), but their inhouse ip does not make them innovative.

  37. Osman commented on Oct 13

    Oops. It looks like some of the functions aren’t working and there are errors. Something goofy with the Excel import feature. I’ll keep working on it. In the meanwhile, if somebody wants a copy of the (working) Excel file drop me an email. You can contact me here.

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